Pick n Pay, South Africa’s third-largest grocery chain, announced on Wednesday that it expects to report a full-year loss, driven by a R2.8 billion (US$155 million) impairment on its loss-making and underperforming core supermarket stores.
Despite the grim forecast, the market reacted positively to the company’s debt restructuring agreement with lenders, resulting in a 9.4 percent increase in its share price.
New CEO Sean Summers faces the challenge of revitalizing a company that has been losing market share to larger rival Shoprite and other competitors for over a decade in a highly competitive and economically strained market characterized by high interest rates and rising inflation. His primary focus is on enhancing the performance of Pick n Pay’s core supermarket business.
Pick n Pay, which also owns the discount grocery retailer Boxer, projected a loss per share between R6.37 and R6.86 for the fiscal year ending February 25, compared to earnings per share of R2.43 in the previous year.
The company explained that about R1.8 billion of the impairment is related to selected loss-making company-owned Pick n Pay stores, which are slated to be closed or converted into Pick n Pay franchises or Boxer stores as part of the group’s strategic plan. An additional R1 billion impairment is attributed to underperforming company-owned stores that will remain operational.
Other factors contributing to the anticipated loss include increased net debt service costs and additional diesel expenses to power generators during blackouts, ensuring stores remain open.
Summers’ turnaround strategy and the debt restructuring are seen as crucial steps in stabilizing Pick n Pay and steering it towards future growth.
